How to Buy Mutual Funds without a Broker
If you are an online investor, you might not want to fuss with getting a broker. Or, perhaps you hate limiting yourself to the transaction-free mutual funds in order to avoid a broker’s high commissions on other funds. You might be a candidate for buying shares directly from the mutual fund companies. You can save money because mutual fund companies typically don’t charge commissions.
If you’re interested in buying a fund that isn’t one of the transaction-free choices with a broker, it’s best to buy directly from the fund company to avoid paying commissions. It’s especially a good idea if you plan to periodically make small investments, which could ring up hefty fees if you use a broker.
To buy mutual funds from a mutual fund company, you need to set up an account, which you can do pretty quickly online. After you decide which fund you’d like to buy, just log on to the fund company’s site and click a link that’s usually labeled Open an Account. You have to answer the same questions needed to open an online brokerage account, including your address and type of account (individual or joint). You also need to tell the mutual fund company whether you want dividends deposited to your account or used to buy additional shares of the fund. You can fill out the application online in about 20 minutes or print it and mail it in.
Most mutual fund companies offer automatic investment plan (AIP) programs. If you sign up for an AIP, the fund company automatically takes money from your bank savings or checking account each month. It’s a good way to make sure that you’re regularly saving money. Some funds even let you start with a smaller initial investment if you sign up for the AIP.
Here is a list of some of the larger mutual fund companies.
American Century No minimum, but $100 a year maintenance fee if balance less than $10,000.
Artisan: $1,000 per fund unless part of AIP.
Dodge & Cox: $2,500 per fund.
Oakmark: $1,000 per fund.
Royce: $2,000 on many funds, and $1,000 if part of AIP. Other funds require $50,000 or more..
T. Rowe Price: $2,500.
Vanguard: $3,000. $10,000 to avoid $20 annual fee. You can also avoid the fee if you manage your account online only. Be sure to sign up for a mutual fund account, not a brokerage account.
Some mutual funds can’t be bought directly by individual investors. A few mutual fund companies, including leading index fund provider Dimensional Fund Advisors, sell their funds only through certified financial planners.